2015-16 Queensland Budget
14 July 2015
Continuing the Palaszczuk Labor Government’s strategy, which has been maintained since Opposition and its successful election campaign, Treasurer Curtis Pitt’s maiden budget is a steady-as-she-goes, no-frills effort focussed on gradual improvement.
The Treasurer also announced a range of economic and social investments, including a $1.6 billion Working Queensland jobs plan and $180 million Advance Queensland plan, as well as $500 million of new money for schools and hospitals. Budget commitments will be paid for through savings and restructuring the balance sheet of Queensland’s Government Owned Corporations (GOCs).
The Budget also provides some comfort to the market through a close to $1 billion surplus in 2014-15; a $1.2 billion surplus in 2015-16; and a gradual reduction in state debt.
Unemployment is forecast to remain at around 6% over coming years.
Due to a softening international outlook resulting in lower demand for the State’s resources, royalty forecasts have been revised down by $3.186 billion since the 2014-15 Mid-Year Fiscal and Economic Review.
An Innovative Budget
Over the last two weeks, Treasurer Pitt promised that the Budget would include some innovative measures: these are set out in its Debt Action Plan and include a halt of Government contributions for public servant superannuation for up to 5 years. This is possible, as public servant superannuation liabilities are currently well in excess of being fully funded by about $10 billion. This measure will result in debt reduction of approximately $3.4 billion.
The second measure relates to the movement of $4.1 billion of State Government debt onto the balance sheets of state-owned energy businesses while maintaining gearing ratios at around 70-75%, which remains lower than industry average levels of gearing.
The Government is also looking at ways to invest public servant superannuation entitlements into government assets. While this may be seen as privatisation by stealth, it may provide the Government with much needed additional investment. Measures in this area continue to be considered by government.
In a measure which the Government and media are promoting as a re-introduction of the Beattie Government’s very successful Smart State Strategy, Premier Palaszczuk and Treasurer Pitt have strongly promoted investments in innovation, skills, education, business development and startups.
The Premier has said she would like to see the next Silicon Valley happen in Queensland, creating a new and fresh, albeit returned, narrative for the administration.
The Government has announced a $10 billion capital works budget to support 27,500 jobs, including $4 billion for the Transport and Roads Program.
Projects the Program will fund include:
- Six lanes on the Gateway Motorway North;
- Commencement of the Toowoomba Second Range Crossing;
- Gold Coast road projects to support the Commonwealth Games; and
- Further duplication of the Bruce Highway.
A review of state finances undertaken by the Queensland Treasury has been published as part of the Budget. The Review has confirmed the importance of delivering sustainable net operating surpluses to ensure the Government’s capital program can be funded primarily from recurrent revenues.
The Review found the State’s debt-to-revenue ratio should be reduced from its current level of 87% to between 70-80% over the next decade; the Treasurer today announced that the Government intends to reduce the ratio to 70% over the forward estimates.
The Review also resulted in the establishment of five fiscal principles, namely:
- Target ongoing reductions in Queensland’s relative debt burden as measured by the GGS debt to revenue ratio;
- Target net operating surpluses that ensure any new capital investment in the GGS is funded primarily through recurrent revenues rather than borrowing;
- The capital program will be managed to ensure a consistent flow of works to support jobs and the economy and reduce the risk of backlogs emerging;
- Maintain competitive taxation by ensuring that GGS own-source revenue remains on average at or below 8.5% of nominal gross state product across the forward estimates; and
- Target full funding of long-term liabilities, such as superannuation and WorkCover, in accordance with actuarial advice.